Chapter 19 Planning for Change
Copyright © Houghton Mifflin Company. All rights reserved.19 | 2 Learning Objectives Discuss how entrepreneurs should prepare for contingencies Explain the purpose of a harvest plan Describe the role of bankruptcy in business failure
Copyright © Houghton Mifflin Company. All rights reserved.19 | 3 Preparing for Contingencies Identifying potential risks –Process improvement strategies to reduce the probability of risk through alliances –Buffer strategies to protect against potential risk that can’t be prevented –Assess supply chain risks
Copyright © Houghton Mifflin Company. All rights reserved.19 | 4 The Components of a Contingency Plan (continued) Taxes and regulations Intellectual piracy Product liability Cyber risk Succession planning –Succession planning in family-owned businesses –Decline in sales
Copyright © Houghton Mifflin Company. All rights reserved.19 | 5 The Components of a Contingency Plan (continued) Calculating the probability that the risk will occur Risk of loss = (P x C x S) Probability of Occurrence Cost of Impact Level of Significance (Example on Page 427)
Copyright © Houghton Mifflin Company. All rights reserved.19 | 6 Figure 19.1: Managing Risk in a New Venture
Copyright © Houghton Mifflin Company. All rights reserved.19 | 7 The Harvest Plan Types of career paths –Growth entrepreneurs –Habitual entrepreneurs –Harvest entrepreneurs –Spiral, or helical, entrepreneurs
Copyright © Houghton Mifflin Company. All rights reserved.19 | 8 The Harvest Plan (continued) Selling the business Cashing out but staying in by –A phased sale
Copyright © Houghton Mifflin Company. All rights reserved.19 | 9 Figure 19.2: Restructuring the Business
Copyright © Houghton Mifflin Company. All rights reserved.19 | 10 Dealing with Failure: Bankruptcy Chapter 11 –Chapter 11 reorganizes the business so it can continue operating and paying its debt Chapter 7 –An order for relief –It liquidates the assets and discharges most types of debt
Copyright © Houghton Mifflin Company. All rights reserved.19 | 11 Dealing with Failure: Bankruptcy (continued) Chapter 7 (continued) –Advice for making a bad situation better Entrepreneurs should talk to other entrepreneurs who have been in similar situations End a business before it affects the entrepreneur’s life A business owner should never commingle personal/business funds Do not ignore the government Begin looking for opportunity Pay back investors first
Copyright © Houghton Mifflin Company. All rights reserved.19 | 12 Final Thoughts Entrepreneurship is –A mindset –A set of attitudes –A skill set that can be learned Who should be an entrepreneur? –Anyone who wants to experience the freedom and independence that comes from knowing that opportunities and resources to make those opportunities a reality are within their grasp!